“Couldn't be tougher right now — when you’ve got these kind of economic numbers coming out, these kind of unemployment numbers,” Stephanopoulos said. “Maybe even more important: The income numbers, incomes going down for most Americans for the last three years. And the number of Americans [who] think we’re on the wrong track.

“Those all spell a defeat in 2012 unless things turn around,” he said. “And that’s what the White House has to bank on right now.”

O’Reilly noted that Americans are losing faith in the economy and once they lose confidence it is “very hard to get back.” Stephanopoulos agreed.

“No question about that — and that's what Ben Bernanke was warning about last week — if a president would have given the Ben Bernanke speech, he would have been called a malaise speech,” he said. “There’s no question about that — I don’t think the president is at that point yet.

“The question is will the trends be going in the right direction. Listen, I don’t want to disagree with you too much here, Bill, because I basically think you’re right,” Stephanopoulos said. “If we don’t get this kind of confidence back — if Europe doesn’t stabilize, if we don't see some growth in the first couple of quarters of 2012 — it’s going to be very, very difficult for President Obama to win.”

Stephanopoulos the said he believes former Massachusetts Gov. Mitt Romney is Obama’s most serious challenger. “He definitely has more reach among independent voters right now than Rick Perry does,” he said.

Perry has “He's got to appeal to more modern, independent, voters,” the former White House aide said.

“But while he’s trying to do that, he’s got Rick Santorum and Michele Bachmann — a little bit of Ron Paul — all pushing him on the right,” he said. “And he’s got to protect that right flank at exactly the same time.”